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AP Microeconomics

Subjects : economics, ap
Instructions:
  • Answer 50 questions in 15 minutes.
  • If you are not ready to take this test, you can study here.
  • Match each statement with the correct term.
  • Don't refresh. All questions and answers are randomly picked and ordered every time you load a test.

This is a study tool. The 3 wrong answers for each question are randomly chosen from answers to other questions. So, you might find at times the answers obvious, but you will see it re-enforces your understanding as you take the test each time.
1. Ed = 8 - infinite change in demand to price change






2. A measure of industry market power. Sum the market share of the four largest firms and a ratio above 40% is a good indicator of oligopoly






3. Factors of production - 4 categories: labor - physical capital - land/natural resources - and entrepreneurial ability






4. An economic system based upon the fundamentals of private property - freedom - self-interest - and prices






5. Costs that change with the level of output. If output is zero - so are TVCs.






6. Indirect - non-purchased - or opportunity costs of resources provided by the entrepreneur






7. A legal maximum price above which the product cannot be sold. If a floor is installed at some level above the equilibrium price - it creates a permanent shortage






8. The philosophy that a citizen should receive a share of economic resources proportional to the marginal revenue product of his or her productivity






9. The firm hires the profit maximizing amount of a resource at the point where MRP = MRC






10. Two goods are consumer complements if they provide more utility when consumed together than when consumed separately






11. The mechanism for combining production resources - with existing technology - into finished goods and services






12. Production of the combination of goods and services that provides the most net benefit to society. The optimal quantity of a good is achieved when the MB = MC of the next unit and only occurs at one point on the PPF






13. The difference between the price received and the marginal cost of producing the good. It is the area above the supply curve and under the price






14. Measures the value of what the next unit of a resource (e.g. - labor) brings to the firm. MRPL = MR x MPL. In a perfectly competitive product market - MRPL = P x MPL. In a monopoly product market - MR < P so MRPm < MRPc.






15. The output where AVC is minimized. If the price falls below this point - the firm chooses to shut down or produce zero units in the short run






16. Ed = 1






17. The sum of consumer surplus and producer surplus






18. The difference between total revenue and total explicit costs






19. Exists if a producer can produce a good at lower opportunity cost than all other producers






20. A legal minimum price below which the product cannot be sold. If a floor is installed at some level above the equilibrium price - it creates a permanent surplus






21. The upward part of the LRAC curve where LRAC rises as plant size increases. This is usually the result of the increased difficulty of managing larger firms - which results in lost efficiency and rising per unit costs.






22. Production inputs that the firm can adjust in the short run to meet changes in demand for their output. Often this is labor and/or raw materials






23. The additional cost incurred from the consumption of the next unit of a good or a service






24. Direct - purchased - out-of-pocket costs paid to resource suppliers provided by the entrepreneur






25. Pm > MR = MC - which is not allocatively efficient and dead weight loss exists. Pm > ATC - which is not productively efficient. Profit > 0 so consumer surplus is transferred to the monopolist as profit






26. The case where economies of scale are so extensive that it is less costly for one firm to supply the entire range of demand






27. A group of firms that agree not to compete with each other on the basis of price - production - or other competitive dimensions. Cartel members operate as a monopolist to maximize their joint profits






28. The price of a good measured in units of currency






29. Holding all else equal - when the price of a good rises - consumers decrease their quantity demanded for that good






30. All firms maximize profit by producing where MR = MC






31. Occurs when an economy's production possibilities increase. This can be a result of more resources - better resources - or improvements in technology.






32. A good for which higher income decreases demand






33. Pmc < MR = MC and Pmc > minimum ATC so outcome is not efficient - but profit = 0.






34. The difference between your willingness to pay and the price you actually pay. It is the area below the demand curve and above the price






35. Exists if a producer can produce more of a good than all other producers






36. The ability to set the price above the perfectly competitive level






37. The total quantity - or total output of a good produced at each quantity of labor employed






38. Another way of saying that firms are earning zero economic profits or a fair rate of return on invested resources






39. The difference between total revenue and total explicit and implicit costs






40. Additional benefits to society not captured by the market demand curve from the production of a good - result in a price that is too high and a market quantity that is too low. Resources are underallocated to the production of this good






41. Exists when the production of a good creates utility for third parties not directly involved in the consumption of production of the good






42. The output where ATC is minimized and economic profit is zero






43. The imbalance between limited productive resources and unlimited human wants






44. The additional benefit received from the consumption of the next unit of a good or service






45. The rate paid on the last dollar earned. This is found by taking the ratio of the change in taxes divided by the change in income






46. The downward part of the LRAC curve where LRAC falls as plan size increases. This is the result of specialization - lower cost of inputs - or other efficiencies of larger scale.






47. A firm that has market power in the factor market (a wage-setter)






48. Product demand - productivity - prices of other resources - and complementary resources






49. Ed < 1






50. Production of maximum output for a given level of technology and resources. All points on the PPF are productively efficient